Smarter Online Credit Card Processing Is An Easy Way to Boost Profits

Smarter Online Credit Card Processing Is An Easy Way to Boost Profits

Have you ever considered accepting online credit card processing? If not, you should.

You’ve invested a lot as an entrepreneur. You may even put in well more than 40 hours per week, which many entrepreneurs tend to do in the early stages.

You certainly don’t want to lose money for no good reason. But you already are when you accept credit card payments.

Even if your customers pay on your website, online credit card processing fees can eat at your profits. You may think it’s the cost of doing business, and in some ways it is.

Depending on your industry, location, and strategy, startup costs could range from as little as a few thousand dollars to well into six figures (or much, much more). Additionally, business owners have monthly business expenses, such as rent, utilities, advertising, and employee wages to consider.

It just requires a different approach to how you have been accepting credit card payments.

How do online credit card processing fees work?

You don’t pay one fee to your merchant service provider (MSP). Numerous fees combine for an effective rate. The effective rate includes all the fees, including MSP markup fees (they have to make money!).

Website credit card processing fees include:

Interchange fee: paid to the card-issuing bank

Assessment fee: paid to the card brand

Pass-through rate: a pricing model that includes interchange and assessment fees

It doesn’t end there.

You may also pay cancellation fees when a transaction is voided. When a customer wants a refund, you may not get fees back when you refund them. Your MSP could even implement rate increases, which doesn’t make sense since they make a percentage of the transaction.

For charges like cancellation fees, negotiate with your MSP. They should waive these. If they don’t, look for alternative providers.

As you can see, online credit card processing fees get complex. Even worse, many MSPs put merchants on confusing multi-tiered plans that come with hidden surcharges and monthly fees.

Why do MSPs do this to clients?

Because they can. They know you’re busy running your business, and don’t have the time to investigate how website payment processing fees work. You simply pay for the convenience your MSP offers you customers, and focus on the business.

It’s time to change that.

Calculate how much you’re losing to online credit card processing fees. It should shock you. And it will motivate you to take action.

How much are online credit card processing fees?

Website credit card processing usually cost merchants more than offline payments. The average is around 2.9% plus $0.30 per transaction, versus 1.5%-2.9% for in-person processing.

Using an average transaction value of $100, you’ll pay $3.20 per transaction for online credit card processing.

Now, let’s say you do 10,000 transactions per year and your annual revenue is $1,000,000. That means:

You’ll pay $32,000 per year in online credit card processing fees!

That’s insane.

If your net margin is 10%, you make $100,000 per year as a business owner. That’s nice, considering it’s well above the average US salary.

But you’re leaving a lot on the table.

If you found a way to get rid of website credit card processing fees, you could earn $32,000 more. That’s a salary increase of 32%!

Over a decade, that could mean $320,000 back into your pocket. That’s money you can use to expand your business, buy a bigger house, give to charity, and retire early.

In short, it’s money you should make an effort to keep (and not give to your MSP).

Easier said than done, right?

In this case, it’s easily said and easily done.

How a cash discount program can boost your bottom line

As an e-commerce business owner, you don’t have to pay ridiculous online credit card processing fees. You just need a smarter strategy, one where you can still accept credit cards but avoid the processing fees.

With a cash discount program, you empower your customers to pay in a manner that’s most affordable and convenient for them. And you have a process in place to ensure you don’t lose money to online credit card processing fees.